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Not a recession, not an expansion . . . maybe a banana?

May 30, 2008 | 2:31
pm

Some perspective on the economy, with a little bit of levity salted in, from the latest weekly commentary of veteran economist Edward Yardeni of Yardeni Research Inc.:

"A recession or a banana? In the 19th century, downturns were usually called depressions. However, the term got a bad name in the 1930s and ‘recession’ was coined. Alfred Kahn, one of Jimmy Carter’s economic advisers, was once rebuked by the president for scaring people by talking of looming recession. Mr. Kahn, in his next speech, substituted the word banana for recession.

"Now economists (including yours truly) are talking about a saucer-shaped recession, i.e., a modest downturn followed by a modest recovery. This doesn’t exactly jibe with the 9,000 drop in initial unemployment claims to 365,000 during the week of May 17 [update for the week ended May 24: a slight rise to 372,000]. Readings over 400,000 are usually associated with recessions.

"Several economists, who say we are in a recession, concede that real GDP might not fall for two consecutive quarters. So maybe the economy is in a banana, rather than a recession?

"On the other hand, the number of people continuing to receive unemployment benefits was unchangedat a four-year high of 3.073 million during the week ending May 10 [updated figure for May 17 week: 3.1 million]. It may be that while firings remain subdued, job opportunities are dwindling as employers impose hiring freezes. It may also be tougher for the unemployed to obtain jobs by moving elsewhere because they can’t sell their homes without taking a big loss."